Trump makes investment banking fees uncertain again

(Reuters) - President Donald Trump’s dramatic intervention in Singapore-based Broadcom Ltd’s (AVGO.O) $117 billion hostile bid for U.S. semiconductor peer Qualcomm Inc (QCOM.O) is the latest reminder to investment bankers not to take lucrative fees on transformative mergers for granted under his administration.

U.S. President Donald Trump arrives at Marine Corps Air Station Miramar in San Diego, California. U.S., March 13, 2018. REUTERS/Kevin Lamarque

Seven investment banks that were backing Broadcom’s bid for Qualcomm, the largest acquisition ever attempted in the technology sector, stand to lose out on fees as a result of Trump’s order on Monday prohibiting the deal due to national security concerns.

“Bankers will be skeptical about cross-border deals that involve technology or data that could have implications for national security or for America’s competitive position in key industries,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business.

This is not the first time Trump’s administration has put investment banking fees in jeopardy. The U.S. Justice Department filed a lawsuit in November to stop AT&T Inc (T.N), from buying HBO and CNN owner Time Warner Inc (TWX.N) for $85 billion, citing antitrust concerns.

To be sure, the Trump administration’s overall track record is not hostile to mergers. Deal activity continues to be robust, with U.S. merger and acquisition volumes reaching $389 billion so far this year, compared with $236.5 billion in the same period a year ago, as companies have been emboldened by U.S. tax reform to pursue big deals.

What is more, banks typically do receive some small portion of the full fees if deals fall through. In the case of Broadcom, the banks could now receive an estimated $20 million, according to Freeman.

However, the high-profile dealmaking casualties illustrate how Trump’s pro-business rhetoric has not always translated into smooth sailing for the regulatory approval of deals.